Sberbank Triples Profit in Second Quarter as Charges Decline

  • Net income rises threefold to 145 billion rubles in year
  • Charges for bad loans fell 18 percent to 96.5 billion rubles

Sberbank PJSC almost tripled its profit in the second quarter, boosted by a drop in bad loans, as the Russian economy shows signs of emerging from its longest recession in two decades.

Net income jumped to 145 billion rubles ($2.2 billion) from 54.2 billion rubles a year earlier, Russia’s biggest lender said in a statement on Thursday. That’s a quarterly record and compares with the 126 billion-ruble average estimate of eight analysts in a Bloomberg survey.

Sberbank shares have doubled over the past year and Russian bank earnings are heading toward levels last seen in 2014, before the oil slump and sanctions over Ukraine plunged the country into a recession. With the economy shrinking at a weaker pace than economists forecast in the three months through June, the central bank has signaled gross domestic product may return to growth in the current quarter.

“We have seen some signs of stabilization, such as the oil prices rising and the ruble strengthening, resulting in expectations of a return to positive GDP growth in the second half of 2016,” Sberbank Chief Executive Officer Herman Gref said in the statement.

Shares rose 0.7 percent to 140.40 rubles by 12:12 p.m. in Moscow, bringing gains this year to about 39 percent. By contrast, some of Europe’s largest lenders have lost almost half their market value this year, hurt by market selloffs and a slump in quarterly earnings.

Charges for bad loans dropped 18 percent to 96.5 billion rubles from a year ago, while the share of non-preforming loans fell to 4.9 percent from 5.2 percent from the first quarter.

Net interest income, the difference between interest generated from loans and that paid on deposits, rose to 339 billion rubles from 227 billion rubles. The bank’s return on equity, a measure of profitability, was at 22.8 percent at the end of the second quarter, up from 10.3 percent a year earlier.

The return on equity “is very strong,” said Olga Naydenova, an analyst at BCS Financial Group in Moscow with a buy recommendation on the shares. “Sberbank’s strong interest generation offset the high growth in costs,” although the large increase in debt restructurings is a bit of a concern.

Sberbank renegotiated 3.8 trillion in loans, up 12 percent from a year earlier, while its operating expenses rose 15 percent to 169 billion rubles.

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